2 Drug Discount Measures in a Duel

By Lisa Girion

Oct. 18, 2005 12 AM PT

Times Staff Writer

In Maine, bus trips to Canada for cheap prescription drugs aren’t as popular as they once were -- thanks to a new drug discount plan for the poor.

Since it took effect in 2004, the program has pushed retailers and pharmaceutical companies to cut prices substantially for eligible residents, reducing demand for the cross-border bargain-hunting excursions.

But though Maine’s approach is winning praise from consumer groups, the pharmaceutical industry points to another discount program in Ohio as the real success story.

That program, because it is voluntary for drug companies and did not attract legal challenges that dogged the effort in Maine, was launched more quickly, backers say.

In California, those two states’ plans are being held up as examples in the debate over Propositions 78 and 79, dueling drug discount initiatives on the Nov. 8 ballot. Both campaigns tout Maine and Ohio as models that California should follow.

Pharmaceutical companies and consumer groups disagree over what the Maine and Ohio experiments demonstrate. But this much is clear: Maine’s plan reaches a far greater share of the state’s needy residents -- and it appears to give them better prices in the drugstore.

One indication of the Maine program’s success is that participation in bus trips to Canadian pharmacies sponsored by the Maine Council of Senior Citizens is half what it was a couple years ago.

“Seniors who had signed up for a bus trip were able to get prescriptions ... for what it cost them in Canada,” said Neena Quirion, director of the senior citizens consumer group.

Called Maine Rx Plus, the program resembles California’s Proposition 79, a measure backed by consumer and labor groups that would set up a drug discount system for low-income residents and allow the state to steer business away from drug companies that don’t participate.

Proposition 78, like Ohio’s Best Rx, is backed by the drug industry. It sets stricter eligibility rules and makes participation voluntary for drug makers.

Although the programs in Maine and Ohio are out front, California -- by virtue of the size of its drug market -- could set a national trend.

With stakes that high, pharmaceutical companies are paying to promote Proposition 78 and defeat Proposition 79, raising more than $80 million for the campaign at last count.

The pharmaceutical industry “is investing so heavily in California to defeat this because if California goes, a lot of other states could go,” said Geoffrey Joyce, a senior economist with the Rand Corp., a think tank in Santa Monica. “It’s just a huge market, and it’s symbolic.”

A Field Poll survey last month found both measures leading, though support for Proposition 78 dropped sharply after respondents learned it is backed by the pharmaceutical industry. Should both be approved, the measure with more votes would take effect.

Since even the experts admit it is impossible to know exactly how well either ballot measure would serve needy Californians, the two campaigns are eager to fill in the gaps with competing analyses of the programs in Ohio and Maine.

Partisans on each side of the battle line have conducted studies comparing the states’ plans -- and, not surprisingly, they draw opposite conclusions.

The Pharmaceutical Research and Manufacturers Assn., a Washington, D.C.-based trade group, says a survey it commissioned proves Ohio’s plan is better. The survey found that Ohio’s Best Rx prices are on average 20% cheaper than Maine Rx Plus for 20 commonly prescribed drugs.

But critics have complained that the survey used estimated prices for Maine, calculated by applying discounts to cash prices reported by pharmacies.

Another study was conducted by Prescription Policy Choices, a Maine group, with backing from Consumers Union. It compared 36 commonly used drugs, using prices obtained from the operators of each state’s program.

It found that generics purchased in stores with a Maine Rx Plus discount were 30% cheaper than Ohio’s Best Rx in-store prices. Name-brand drugs purchased through the Maine program in stores were 4.45% cheaper than the same drugs purchased in stores participating in Ohio’s Best Rx.

The Maine Heritage Center, a conservative think tank, conducted a third study using the consumer group’s data. It concluded that though in-store prices might be lower in Maine, mail-order prices under Ohio’s Best Rx were cheapest overall. Those bargains were of little use to Ohio plan enrollees, however, since fewer than 2% of them buy drugs by mail.

A comparison of the total cost of 36 common drugs shows the variation among the plans. Although Ohio’s Best Rx mail order price was lowest at $4,533, that state’s in-store tab was highest -- $4,998. Maine Rx Plus enrollees could buy the same basket of drugs in participating stores for $4,758 and by mail for $4,708.

Apart from the debate over the best discount, it is clear that Maine’s plan is reaching a greater share of needy residents. At least 40% of eligible Maine residents had signed up in the first three months, compared with at most 12% of eligible residents in Ohio after eight months, according to state officials. That works out to more than 7% of Maine’s total population and less than half of 1% of Ohio’s.

A key difference between the Ohio and Maine programs, as with Propositions 78 and 79, is the power of the state to press for discounts.

Ohio’s Best Rx, like the program that Proposition 78 would establish, allows the state to encourage drug makers and retailers, but gives it no power to punish companies that do not participate.

More than 20 manufacturers have agreed to make rebates on some of their drugs, but most of the savings have come from discounts made by pharmacies and other retailers.

In Maine, state officials have the power to place certain drugs sold by uncooperative pharmaceutical companies on a list requiring prior authorization before physicians can prescribe them to Medicaid patients.

Because physicians are inclined to avoid the delay and inconvenience associated with obtaining prior authorization, placement on the list would have the effect of shifting market share toward comparable drugs that can be prescribed at will.

Maine officials have not invoked that power. Instead, they are using a carrot, of sorts, extending to manufacturers that already are providing discounts to the state’s Medicaid program the opportunity to expand their market share through Maine Rx Plus.

There are stark price differences between drug discount plans where the sellers’ compliance is voluntary and where the purchaser has a “hammer” available to bargain with, said Kathryn Duke, director of the Oakland-based Public Health Institute’s Medicine for People in Need project.

“It’s pretty clear,” Duke said, “that a hammer brings better prices than a voluntary program.”

But the drug industry argues that in California, the “hammer” provision in Proposition 79 may be the measure’s undoing.

“It’s fraught with some legal infirmities and regulatory problems

Here, too, Maine’s experience offers some insight. A legal challenge by the industry trade group delayed implementation of discounts in Maine for three years, but ultimately failed. The U.S. Supreme Court sent the suit back to a local court, where it was thrown out.

Sharon Treat, a former Maine lawmaker who carried a piece of the discount drug legislation, said Maine Rx Plus lays out a legal roadmap that California, or any other state, could follow.

“They probably will sue,” Treat said of the pharmaceutical industry, “but that doesn’t mean they are going to win.”

(BEGIN TEXT OF INFOBOX)

Dueling discounts

The Nov. 8 ballot in California contains two measures that would create prescription drug discount programs for the state’s needy. Some key differences:

Proposition 78

Maximum income for an individual: $29,000

Maximum income for family of four: $58,000

Estimated number of people eligible for the benefit: 4 million to 6 million

Families with private drug coverage included?: No

Annual fee for participants: $15

Voluntary for drug companies?: Yes

Proposition 79

Maximum income for an individual: $38,000

Maximum income for family of four: $77,000

Estimated number of people eligible for the benefit: 8 million to 10 million

Families with private drug coverage included?: Yes